Custom «Mergers, Acquisitions, and International Strategies» Essay Paper Sample

Mergers, Acquisitions, and International Strategies

Introduction

Business strategies have been applied in different business situations to deal with various situations in the industry. Business strategies have enabled companies to improve the manner in which they produce different goods and services. Many companies opt for mergers and acquisitions as the strategy to improve their position in the market (Hills, Jones, & Schilling, 2014). In this regard, analyzing business strategies of two corporations, Coca-Cola Company and J. C Penney Corporation, will be the focus of this paper. The analysis of these two companies will reveal business strategies that the companies have adopted both locally and internationally. Besides, the paper will address how these companies have dealt with these strategies in their daily activities to obtain maximum benefits from them.

The Coca-Cola Company and Acquisitions

The Coca- Cola Company is one of the largest beverage companies in the world with its headquarters in Atlanta, Georgia. Throughout its history since the late 1880s, the company has been involved in the processing of over 400 beverage brands. The signature brands for the company that are internationally acclaimed are Coke, Fanta, and Sprite.

Coca-Cola has had various acquisitions over the years that have advanced its international business strategies. These acquisitions date back to the 1960s when Coca-Cola acquired Minute Maid. Other acquisitions include Odwalla Company in 2001 that manufactures juices and smoothies. The most current acquisition that the company has been targeting is Monster Beverage Corporation. Coca Cola acquired a 16.7 percent share in the energy drink company (The Coca-Cola Company, 2014). This stake equates to over $2 billion net payments. In this regard, the non-energy products on Monster Beverage will be transferred to Coca-Cola. These products include Hubert's Lemonade and Hansens Natural Soda among others.

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The acquisition of Monster Beverages is considered to take a different strategic direction compared to other acquisitions in the past. Most acquisitions have been aimed at reducing competition in the market and improving the strength of Coca-Cola in the market. However, Monster Beverages acquisition is an international business strategy move that is aimed at enabling Coca-Cola to stabilize its revenues in soda sales. The company had been experiencing a decline in the growth of soda sales. This decline was detrimental to the company mainly because soda sales made up over 60 percent of the company’s general revenues. Therefore, acquiring Monster Beverages would enable Coca-Cola to expand its market share in the energy drinks sector. Besides, the acquisition would also provide Coca-Cola with exposure to this sector, thus stabilizing the soda market and enhancing soda sales in the long run.

 
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It is evident that the international business strategy to have a stake in Monster Beverages Corporation was a wise choice. Acquiring Monster Beverages will enable Coca-Cola to counter the decline in global soda sales. The company will be able to venture into the energy drinks sector. Venturing into these new markets will give the company other revenue options as soda sales are predicted to keep declining as a result of public health consciousness (Hills, Jones, & Schilling, 2014). The acquisition of the business is also a wise choice as the company will be able to increase its 16.7 percent stake over the years and eventually buy out the entire corporation. This will be important in increasing the company’s capital assets and encouraging business growth.

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J. C Penney Corporation, Inc. and Mergers

Established in Plano, Texas, J. C Penney (JCP) is a corporation of a chain of department stores that sell conventional merchandise. The organization is solely based in the US, operating over 1,000 department stores in 49 American states. The company makes various goods and services accessible to its customers, including clothing, furniture, and other home accessories and appliances (J. C. Penney Corporation Inc, 2013). The company also provides Internet services as an internet retailer. The company opened its doors to its first customers in 1902.

One of the companies that would be suited to acquire or merge with JCP is Wal-Mart Stores Inc. Wal-Mart is an international retail chain store that also operates under discount departmental stores. The company has over 10,000 stores in over 25 countries around the world. Wal-Mart is an excellent option for JCP to merge with because both companies are retail corporations involved in running discount department stores. A merger between these two companies would ensure that both JCP and Wal-Mart increase their market share. In addition, the merger with Wal-Mart will be significant in enabling JCP to have a competitive advantage over other US-based retail companies.

Wal-Mart is a profitable target because of its enhanced establishment in the local and international markets. Locally, the company will introduce JCP to a larger customer base than before. Having an extensive customer base will enable the company to source more products and expand its horizons in the industry. Internationally, Wal-Mart will ensure that JCP is introduced to the global arena and enhances its abilities to compete on a global scale. Wal-Mart will also ensure that both companies achieve diversification. Diversification is important as it will ensure that both companies share knowledge in different sectors to enhance their strength in the market (Dess, Eisner & Lumpkin, 2011).

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Hills, Jones, and Schilling (2014) also explain that a merger with Wal-Mart will enable JCP to reduce a lot of its expenses. As the smaller company in the merger, JCP will be able to enjoy a streamlined market for its products. As the larger company, Wal-Mart will have access to a stronger purchasing power, thus reducing the costs of raw materials for Wal-Mart. The merger will serve as an important strategic move for both companies, but most importantly for JCP as its market penetration will increase.

Coca-Cola’s International Business Level Strategy and International Corporate Level Strategy

At the international level, the business level strategy of the company is strengthening prospects and elements of its international distribution system in European and Asian markets (The Coca-Cola Company, 2014). The company has realized that without an efficient distribution system in European and Asian markets it is impossible to foster massive sales and obtain revenues from the products. The international business level strategy of reinforcing its distribution system in international markets of China, Germany, and India has enhanced the manner in which the company obtains revenues on its different products. Strengthening the distribution system requires the company to purchase bottling systems in Europe and Asia that are performing dismally in the market. The company then carries out extensive and intensive research to collect data that will be significant in ensuring these underperforming bottling systems are improved. After research, it is seen that Coca-Cola works on a means of improving bottling companies. The company then sells them back to other existing bottlers who have a stronger position in the market. For example, the company has acquired eighteen German bottling operations companies that cost over $500 million (The Coca-Cola Company, 2014). This move has enabled the company to have stronger franchising rights in the German market, thus improving the distribution of the Coca-Cola products in European markets. Therefore, this international business strategy ensures that the operational efficiency of Coca-Cola’s distribution systems is enhanced in the international markets.

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On the other hand, product development is the primary international corporate level strategy that Coca-Cola has successfully formulated and implemented. The product development strategy has given Coca-Cola the opportunity to develop new products and make changes to the existing products to suit tastes and preferences of its customers. For example, health concerns among consumers have made the company facilitate adjustments to their product development strategy. As a result, they have developed Diet Coke, Classic Coke, and Coke Zero. These products attract attention of consumers who have weight and health concerns. The company has been able to enhance an effective product development strategy because of its brand awareness over the years. Through brand awareness, the company has persuaded the public to believe in its viability and affordability, thus enhancing efficient market penetration even with new products (Hills, Jones, & Schilling, 2014). Product development as an international corporate strategy has improved the manner in which Coca-Cola enters new markets with new and existing products and how it thrives in existing markets with new products as well.

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For the company to continue thriving in the international market, it will need to incorporate other business level strategies such as differentiation of its international business level strategies (Dess, Esiner & Lumpkin, 2011). The company will use different strategies to appeal to different markets. The company should also improve the use of its internal resources and use them as international level business and corporate level strategies. Elements such as human resources, as well as technological and financial resources should be used to appeal to international markets. Such efforts will also require the use of corporate social responsibilities and sustainability efforts to enhance the manner in which business and corporate operations are done.

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Business Level Strategy and Corporate Level Strategy Proposals for JCP

One of the primary business level strategies that will suit JCP is the implementation of a cost leadership strategy. Dess, Eisner, and Lumpkin (2011) describe cost leadership as an integrated system of activities in the company that results in the creation of a low cost of operation. Therefore, operation costs are reduced to enable the company to become a cost leader in the market. As a result, the company will gain competitive advantage in the market as it will be operating at a low cost compared to other local US-based retail stores. This strategy is also suited for JCP because of the nature of the industry that it is operating in. The company belongs to an industry where product differentiation is practically impossible. Therefore, JCP would benefit by improving its operations as a means of differentiation. The industry within which JCP operates is also very definite. In this regard, buyers do not incur any switching costs from one retail store to the other. Therefore, having a cost leadership strategy will increase switching costs, thus creating brand loyalty among customers.

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The proposed corporate level strategy for JCP is a value-creation strategy that will involve diversification in terms of geographical and product diversification. The company should increase the number of products that it offers in its stores to attract a broad customer base. Product diversification will enable the company to dominate the market share and increase revenues. Geographical diversification will ensure that the company has more department stores in smaller towns of the states where these stores are located. This strategy will create value for the products offered by the company and increase its market share (Hills, Jones, & Schilling, 2014).

Conclusion

Operating at an international scale is a tricky, but profitable venture. It requires an effective system of international business and corporate level strategies that will ensure that the company can penetrate international markets. For Coca-Cola, product development and efficiency in distribution are primary corporate and business level strategies respectively. These strategies have made Coca-Cola a world leader in the beverages industry. For JCP, cost leadership and diversification are recommended business and corporate level strategies. These plans will give the company an edge in the market, as well as increase its market share.

 

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